7/22/2002 @ 12:00AM

Reclaiming Its Patrimony

Sweden-based Electrolux Group, with $13.1 billion in revenues, makes consumer goods such as vacuum cleaners, refrigerators and other big kitchen appliances, as well as lawn tractors and chain saws. Heading this diverse operation is new Chief Executive Hans Stråberg, 46, who took over in April. Stråberg appears to be more low-key than his predecessor, Michael Treschow (Mike the Knife), who focused on cost-cutting. Stråberg is expected to emphasize product innovation and marketing. In Europe Electrolux owns more than 25 brands, which the company plans to consolidate into three core signatures: Electrolux, AEG and Zanussi.

A deep restructuring that was started in 1997 by Treschow is now paying big dividends and is expected to yield annual savings of $230 million, beginning in 2003.

Electrolux’s operating margin (income before interest, taxes, depreciation and amortization divided by net sales) hasn’t climbed in a straight line, but it was 8.7% in the first quarter of this year versus 7.8% in 1997.

Investors have been impressed: Electrolux’s stock is up 24% (in U.S. dollars) over the past 12 months.

Electrolux is now directing more attention to the U.S., where the company has had a confused identity. Its U.S. brands include Frigidaire (refrigerators, washers and air conditioners), Eureka (vacuum cleaners) and Poulan (chain saws).

Though Electrolux is probably best known in the U.S. for vacuum cleaners, the Swedish parent actually gave up U.S. rights to the Electrolux name more than 30 years ago. The brand has had several owners in the States, the latest a company now known as Aerus (FORBES, Nov. 12, 2001).

Electrolux Group hopes to put an end to this nonsense. In 2000 the Swedish company cut a deal with Dallas-based Aerus’ parent, Engles Urso Follmer Capital Corp., reacquiring the rights to its name on appliances in the U.S.

America’s first “genuine” Electrolux will be an air purifier, due out later this year. Electrolux refrigerators and washers will be introduced to the U.S., but it’s not clear when this will happen. The company is clearly targeting the growing U.S. market for upscale appliances and the snob appeal of Euro brands. And at some point (the company won’t say exactly when) Electrolux will again manufacture and sell its namesake vacuums in America.

Even with European appliance sales expected to be flat this year, Rune Marsdal, an analyst with Danske Securities, expects a leaner, cleaner and meaner Electrolux to post a pretax profit gain of 25% in 2002.

“The main thing is that the appliance markets are recovering,” Marsdal says. “And cost-cutting will continue to improve earnings going forward.”